Don't Break the Bank: A Student's Guide to Managing Money (18 page)

With a prepaid plan, you can buy a “minutes card” (available at major stores) that allows you to upload a certain dollar amount or level of minutes to your phone. Once you use up that amount, you need to get another card to add minutes. You may also be able to buy more minutes online. Most of the prepaid services allow you to register a credit card online, so your minutes will automatically be replenished when you run low, and you don’t risk getting cut off.

Some services also have a monthly prepaid plan. Yes, you will have a monthly bill, but you don’t need to worry about extra charges—and you don’t have a contract or have to pass a credit check.

Food

Food and entertainment are big expenses for many teens. If you are buying your own groceries, then this would go under the “necessity” category. But for most teens, food purchases are in the form of fast food, lattes, and a bite to eat with friends after school. This is one of those areas where “little” expenses can add up quickly. That slice of pizza and soda may not seem like a big deal budgetwise, but if this is part of your daily routine, it can add up to a sizeable expense on a monthly basis.

      
Tip:
Even if you don’t actually have a current service plan—or if you’ve run out of minutes on your prepaid plan—keep your phone charged and with you. Most phones can still be used to call 911, regardless of whether you have any available minutes on your plan.

Cutting down on food purchases may be one of the quickest ways to make a change in your budget, but it might not be an easy adjustment, especially if this is part of your social routine. It may be easier if you can get your friends on board. Try to come up with creative alternatives—like maybe coming up with fun menus of things you can make at home. Then take turns hosting get-togethers at each other’s houses. Potlucks can be fun!

Also, check out the Web sites of local restaurants to see if they offer online specials or deals on certain days of the week.

Bored to Death, Excited to Debt

There’s a common belief that the word “tip” is actually an acronym that stands for “To Insure Promptness,” but most sources say this isn’t really true.       

Entertainment often doesn’t come cheap. But let’s face it: It’s hard to justify this as a necessity—although we know you will probably try! So if you’re on a tight budget, this is probably the first place where you need to cut spending. If money is really scarce, you may need to cut entertainment expenses down to zero or close to it. That doesn’t mean you can’t have any fun, it just means you will need to be creative about coming up with free or cheap fun things to do.

If you do have a little bit of room for entertainment in your budget, this is a good time to flex your savvy shopping muscles. Use a service like Netflix (for movies) and GameFly (for video games) that lets you pay one flat fee each month. That makes it easy to plan the cost into your budget. And don’t overlook your local public library—in addition to books, they often have DVDs that you can check out for free.

For concerts and shows, check out sites like StubHub to buy tickets. And be sure to look on the venue’s Web site to see if they have any special deals on cheap tickets.

I Get Around: Gas and Transportation Costs

Depending on where you live and your daily routine, you may have some transportation expenses, especially if you need a ride to work or school. If you have your own car, you will have insurance costs, registration, and other expenses, unless your parents cover those costs. Then there is gas, which at today’s prices can really become a major expense if you drive a lot.

      
Tip:
Use online “deal hunter” forums, such as the ones at FatWallet.com, to get tips from other bargain hunters as to the best deals. You can get great scoops on deals on just about everything, from electronics to clothing.

But even if you don’t have a car of your own, you may have transportation costs, such as for public transportation. (Keep in mind that public transportation is earth-friendly and is often the fastest way to get around town. Plus, there are no parking hassles!) If a friend or sibling gives you a ride frequently, you should offer to contribute some money toward the cost of gas.

Clothing

Even if you aren’t a fashionista, clothing can still get expensive. If you attend a school with a dress code, you may essentially have two separate wardrobes—one for school and one for the rest of the time.

Expert Advice

“Explore the world of discounted gift cards—the new way to save money! Save up to 35% on clothing, restaurants, movies, and more! Check out PlasticJungle.com.”

~       
Kristl Story of TheBudgetDiet.com

This is another case where it can really pay off to be a smart shopper. Watch for sales, and visit stores’ Web sites, where they often have special online deals. And sign up for the e-mail mailing list, if they have one, as you may get alerts about secret deals and maybe even receive coupons.

Kristl Story of TheBudgetDiet.com recommends checking out consignment shops, thrift stores, and stores like Plato’s Closet that offer brand name, gently used clothing for great deals on trendy styles. You can often find items here for a fraction of what you would pay at a mall store. And while you’re there, bring in some of your old clothes to sell or trade.

Vintage looks are really popular right now, so you may be able to find some of your favorite past fashion trends at thrift stores. Use your creativity and be original—you just may start some new trends!

Ways to Save Money and Cut Expenses

In challenging economic times, teens are realizing it’s important to be a savvy shopper (and saver). In a Seventeen magazine survey, 55 percent of teens say they are waiting for items to go on sale, 50 percent are making fewer “impulse purchases,” and 42 percent are more likely to “comparison shop for the best price.” Only 22 percent said that the economy has “little to no affect” on their shopping behaviors.      

Unless you have an ATM in your bedroom, you only have so much cash to go around. The best way to stretch your budget (and make room for fun stuff) is to cut expenses and use smart strategies to save money wherever you can.

Many teens feel a little embarrassed (at least at first) about doing things like comparing sale ads and cutting coupons. But that embarrassment will quickly fade when you realize how much money you can save. Your friends may even be amazed when they see how far you can stretch your cash!

3 Things You Can Do to Make Your Money Last

By Tori Molnar, Teenage President and CEO of Utoria, and Founder of
She Can Make Change
www.myutoria.com

Expert Advice

Don’t be bashful about using coupons: There are a million lessons we’ve learned from the last recession and one of them is: There’s nothing shameful about using coupons. Don’t think your friends will mock you and call you a coupon-clipping grandma if you use coupons or deals. They’ll probably be jealous of the additional money you’ll have to spend on yourself!

~       
Jackie Warrick, President & Chief Savings Officer at CouponCabin.com

1. Exchange extra effort to save money.
For example, instead of shopping at your leisure, try shopping during special events and holidays. There will be more people in the stores, but the deals are worth it! Many times, stores will offer up to 50 percent off during events like Black Friday, Labor Day, Memorial Day, Post-Christmas Clearance sales, and Back to School. People are often enraged by the extreme commercialization of holidays, but you should embrace it, and use the deals to your advantage.

2. Trade in old things for money.
Instead of letting old clothes, technology, etc. sit in the back of your closet, take your items to a consignment shop or sale or sell it online. Doing this lowers the cost of the item to you, so in a sense, you just saved more money! For example, say you followed tip #1 and shopped during a sale and got a shirt that is regularly $29.99 for $15. You wear your shirt a few times and grow out of it. You then take this shirt to the consignment sale, and they give you $8 for a shirt that you’ve already worn and enjoyed. Technically, this means that the $30 shirt you bought only cost you $7. That’s a lot of money saved!

3. Look for coupons and special promotions before going out with friends.
It’s easy to wait to buy clothes, books, and electronics during special promotions, but you can’t wait to have fun! So before you go to the movies, bowling, or to your favorite restaurant, look for coupons or go on a certain night when they’re having a special promotion. This is a great idea if you are willing to compromise on what day you go out. Sometimes, you can also find comparable places that differ in price. For example, you may want to go to Subway, but you have a “free sub” coupon to a comparable hoagie shop. Make sure to try Google for coupons first. For example, if I’m going to Fox’s Pizza, I would Google “Fox’s Pizza coupons.” This tends to have a pretty high success rate.

Part V

Credit Cards and Debt

Nobody really likes debt, but it can be tough to avoid—especially if you want to buy large items like a car or a house. The key is learning how to handle debt responsibly—and how to keep from getting in over your head. You also need to know how to monitor your own credit and what lenders (and others) look for when checking your credit. We’ll share essential tips and information you need to know about paying with plastic to help you avoid getting into debt.

Chapter 9

Understanding Debt and Credit

Nobody likes debt (something owed), but few people can manage to totally avoid it. If you ever want to buy a house or a new car, you will most likely need to get a loan—DEBT! In addition, many people use student loans in order to pay for college—DEBT! And finally, of course, there are credit cards—most people have several of those—DEBT!

It’s nearly impossible to totally avoid credit and debt. But it’s important to educate yourself about it and handle it responsibly. It’s fairly easy to get in over your head with debt, and you can end up making mistakes that will be costly to try and correct.

What Is Credit?

Credit is your ability to buy something even though you don’t have enough money to pay for it upfront. You get a loan or a credit account and agree to repay that money (plus interest and other charges). This is a debt that you must pay back. Sometimes, especially if the debt is for a high amount, the lender requires collateral, which is property that the lender can take if you don’t pay back the loan. For a mortgage, that would be the house, and for a car loan, it would be the vehicle. This is known as secured debt because the lenders have some security to ensure that they will get their money.

Good and Bad Credit

If you have paid all of your bills on time and haven’t racked up sky-high credit card bills, you probably have good credit. Good credit means you have a history of handling credit responsibly. On the other hand, if you’ve been late paying bills and have maxed out your credit cards, your credit may not be so good. Good credit is important because it makes it easier to get a loan. You will also usually get the best interest rate and terms if you have good credit.

Revolving credit
is a credit account that you can use over and over again. For example, if you have a credit card and you pay off the balance, you can then use that available credit again to charge more purchases. Credit that you get for a mortgage or car purchase is usually an
installment loan
, where you borrow a specific amount and then pay a certain payment every month until the debt is paid off.

Credit Reporting Agencies

A credit reporting agency (also known as a credit bureau) does not actually give loans or otherwise provide you with credit. But these agencies play a very important role in your life when it comes to finances. They keep track of your credit history and credit-related transactions. They then use that information to compile your
credit report
and calculate your
credit score
. Your credit “worthiness” is judged mainly based on your credit reports and your credit score.

There are three major credit reporting agencies: Equifax, Experian, and TransUnion.

Contacting the Credit Bureaus